We are at an interesting crossroads right now. Our long-term behavioral model has indicated as in previous weeks that emerging market equity and fixed income are the best bets. More specifically our model is signaling to overweight India, Malaysia, South Korea, and Turkey and high yield and Investment grade bonds.
The country that received the lowest exposure is the United States equity market.
I make a point about the interesting crossroads because I see that bullishness in fixed income is moving toward unprecedented levels. Which at some point becomes a contrarian signal. However, the US equity market behavioral measure is signaling bearish sentiment. This means at some point the investment cycle of over weighting bonds (which to year to date has been the best move regarding the US) may end in the near future. But where to put the money when that time comes if US equity market is still signaling bearish sentiment. Well, we have confidence when that time comes our behavioral model will signal the correct steps to make. As of today, we will are still allocating to fixed income and emerging market equity.
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